DEXUS poised to deliver

DEXUS Property Group
is moving quickly to realise its new “office first" vision, as it prepares to secure a Melbourne tower for close to $50 million.

DEXUS is within days of closing on the Powercor building at 40 Market Street that has been held in a single-asset vehicle by Entrust Funds Management, market sources say.

The Western Australia-based fund manager took the nine-storey asset to the market in July through Knight Frank agents Paul Henley and Stephen Imrie.

Entrust was installed to run the fund three years ago as its former manager, Mariner Financial, wound down its business. The trust has a $25.2 million facility, drawn down to $23 million, with National Australia Bank. It is due for repayment at the end of this month.

The transaction, if completed as expected, will be one of the first instalments in the strategy outlined by DEXUS chief executive Darren Steinberg at the annual results meeting in August.

Under the plan, DEXUS is set to offload more than $1 billion of assets as it tailors its portfolio toward blue-chip office property.

As part of that process, DEXUS has flagged the prospect of launching a new wholesale office fund.

The entire 12,000 square metre Market Street building is leased to Powercor until the end of 2018, with fixed annual increases of 3.75 per cent.

The purchase is seen as a value-add opportunity for DEXUS, which can reposition and lease up the Sydney tower.

The DEXUS plan is already winning support in the market; Credit Suisse analysts put it at the top of the pecking order for office landlords this week.

“We maintain a preference for DEXUS’s premium portfolio for its upside exposure to cap rates compressing and relatively less downside to tough operating conditions despite its 30 per cent of leases expiring over the next three years," Credit Suisse analysts said in a note to clients.

The analysts noted DEXUS’s potential sale of its US industrial portfolio would give it a large capacity for office property acquisitions. They forecast DEXUS could move on $150 million of acquisitions in the current year.